Advance Payment Guarantee provides a contractor with an “interest free loan” or deposit from the employer which is repayable before the completion of the works or used to buy materials for the relevant projects.
The employer advances a certain amount of money to the contractor for work to be completed. The advance payment can be used to purchase plant, machinery and/or materials in cash for a particular project. This advance payment guarantee generally reduces and is set off against payment certificates or when the relevant material arrives on site the advance payment guarantee is cancelled.
Obtaining an advance payment guarantee during the start of the contract where the greatest strain is placed on a contractor’s cash flow the APG will provide the contractor with much needed working capital.
